In a statement late Thursday, Duffy said his presence had become a "significant distraction" to his caucus colleagues and he would step aside, to sit as an independent senator, pending the resolution of certain questions.

"Throughout this entire situation I have sought only to do the right thing," Duffy wrote. "I look forward to all relevant facts being made clear in due course, at which point I am hopeful I will be able to rejoin the Conservative caucus."

A government source told HuffPost there were a "growing number of questions" about Duffy's conduct and he would have to answer to them as an independent senator.

The Prime Minister's office made it clear Thursday that Stephen Harper was standing by his chief of staff, Nigel Wright, but wasn't prepared to go out on a limb for Duffy.

“Nigel will not resign,” Harper’s press secretary Carl Vallée said. “He has the confidence of the prime minister.”

Wright personally cut a $90,000 cheque to Duffy this winter allowing him to refund inappropriate housing expenditures he’d charged to the Senate before a third-party audit was to begin a study into his expenses.

A Conservative insider said Duffy tugged on the heartstrings of Wright, a multi-millionaire who was concerned by Duffy’s debt load and heart condition and who dipped into his personal funds to help make the senator’s problem go away.

There was intense internal pressure for Duffy to resign -- although several source told HuffPost he was not asked to step down.
“At present time, Senator Duffy is a member of caucus,” Vallée told HuffPost late Thursday afternoon.

Several sources said it was a matter of time before Duffy was shown the door or took it.

“Nobody is happy with this situation,” he added. “People are displeased and uneasy. His behaviour reflects badly on the Senate as an institution as well as on all of his colleagues.”

Conservative Senator Don Plett told HuffPost he didn't think Duffy should leave the Tory caucus nor should he be shown the door.

“I think Mike Duffy, as anybody else, deserves due diligence and don’t think that has been exhausted yet. And so, I do not have any issues with Mike Duffy staying as one of my Senate colleagues,” Plett said.

Duffy, a former broadcaster and a Harper senator since 2009, may be in trouble on several fronts. The Senate’s conflict of interest code bars senators from receiving “any gift or benefit, directly or indirectly, that could reasonably be considered to relate to the senator’s position.”

As an exception, senators can receive gifts that fall within the “customary standards of hospitality” but they have to declare anything over $500 in a public registry, and Duffy failed to do so.

Vallée described Wright’s gesture as a gift saying: “Nigel did not expect to be repaid.”

CTV, however, reported it had an email from Duffy on Tuesday contradicting the PMO. In it, Duffy claimed he took out a loan from the Royal Bank and that "Nigel played no role.”

The PMO insisted Harper was not told of the deal between the two men before CTV broke the news of the pact Tuesday.
The Senate Ethics Officer Lyse Ricard would not say whether she is investigating Duffy.

NDP ethics critic Charlie Angus wrote to her Thursday asking for an investigation into the Duffy-Wright deal.

“It goes without saying that a cheque for such a large amount is far from a customary standard of hospitality, nor a normal expression of courtesy,” Angus wrote in a letter.

The NDP MP also suggested that Duffy, Wright, or both may have breached section 16 of the Parliament of Canada Act which prohibits a senator from receiving compensation for any services rendered.

The RCMP would not say whether it was investigating the $90,000 gift. Cpl. Lucy Shorey said it was not in the RCMP’s practice to “neither confirm nor deny” who or what is the subject of any investigation.

CBC suggested Thursday that Duffy also appeared to improperly claim he was on Senate business during the last federal election when he was in fact campaigning for the Conservatives in the Greater Toronto Area.

The PMO is reviewing Duffy’s expense claims from the 2011 campaign, CBC reported.

The revelations were found in a Deloitte audit into Duffy’s primary and secondary residence. A long-time Ottawa-area resident, the Conservative senator came under fire earlier this year for charging taxpayers living expenses for his home in the suburb of Kanata.

Duffy claimed his cottage in Prince Edward Island as his primary residence in order to receive up to $22,000 in annual housing and living allowances while in the National Capital Region.

A Senate committee calculated he owed the upper chamber $90,172.24 in inappropriate expenses.

In a Feb. 22 interview with CBC Charlottetown, Duffy said he and his wife were going to “voluntarily pay back my living expenses related to the house we have in Ottawa.”

But in an interview with Global News on April 18, Duffy seemed to suggest he would wait until the Deloitte audit was completed before sending in a cheque.

A day later, Duffy and the Senate both confirmed he had reimbursed taxpayers $90,172.24 for living allowances.
Duffy did not return calls or emails for comment.

On Wednesday, the Office of the Conflict of Interest and Ethics Commissioner said Mary Dawson was “reviewing” Wright’s involvement in the repayment of Duffy’s expenses.

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Wright Helps Duffy

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Also, not for naught: what the hell is Mike Duffy doing with his money that he can't pay back his improper expenses?

Mike Duffy: "I stayed silent on the orders of the PMO." For whatever reason, the sentence just sends chills up my spine.

Mike Duffy is such an idiot. I wish Frank Magazine was still around to really savage him properly.

There's only one explanation - Wright expected SEX in return for his gift of $90K to Mike Duffy. Happens all the time. #cdnpoli

Welfare cheats are kicked out for $90 but PM Harper gave Mike Duffy Senate job and he cheated $90,000 #cdnpoli #HarperHistory #BadEconomy

Karma, Mike Duffy. Karma. #CutTheChequeNigel

This Mike Duffy story just keeps getting better and @RobertFife hasn't slept in 5 days!

The $90,172 Nigel Wright covered considered a gift that Sen. Mike Duffy will have to pay taxes on. #cdnpoli